Debt Management Program

You must have come across several advertisements marketing debt management plans or programs and wondered about the contents and uses of such a service. To put the entire concept in simple words, a DMP is a service the helps individuals to repay their due debts, quickly, and in some cases also cheaply. The DMP usually has a requisite fee and in some cases, a commission, though you may also find a non-profit debt management plan. It must be noted that debt management is applicable for unsecured debts and loans. However, there are cases where, highly specialized services also have management for secured debts.

What is a Debt Management Program

There are basically several sub-services that are included in the debt management plan or program, which help you to repay your debts properly. The primary service of all debt management services is debt advice and a repayment plan. In such a plan, the debt management services provide their clients with a thorough calculated working of repayment. While sketching out the repayment plan, the service providers take into consideration several aspects of debts. Namely,

• The due dates of installments and credit card companies.
• Late payment charges and extra service fees of every creditor. The debt management service consultants also often consider the effect of late payment on credit reports.
• In many cases the debt management services also consider the variable APRs (Annual Percentage Rate). They will advise their customers to follow some or the other spending schedule and repayment mechanism, so as to keep a check on the excessive rise of APR.

In addition to these preliminary services, debt management companies also provide their clients with several additional services such as credit counseling. In such services, consumers sit across the table and the counselor explains the different calculations and mechanisms of credit and financial services. Several debt management services provide their clients with debt negotiation and debt settlement procedures where the company negotiates a lowered rate of debt repayment with the creditors. You may also find a debt management affiliate program that provide the clients with debt financing and debt consolidation services.

Pros and Cons

• Pros

1. The first advantage of the program is that it successfully reduces your over flowing debt without harming any of your personal assets.
2. The second advantage of the debt settlement plan or program is that the credit report is not affected drastically and credit score also does not suffer.
3. Proper planning, and in some cases negotiation, has a really good result as the debt is repaid quickly without the unnecessary APRs and fees.

• Cons

1. There are not many disadvantages, the first one being that a substantial fee or commission is charged by the debt management company or service.
2. The second probable disadvantage is that the debt negotiation process harms the credit report and reduces the credit score.
3. The third disadvantage is that the program counselor may ask you to shut down some of your credit cards, though this should not be actually viewed as a disadvantage.

How to Choose a Debt Management Program

The procedure that can be used to choose the right program can be difficult, as there are several different options to choose from and too many choices may confuse you. Hence, before you choose one, consider the following aspects of the program.

• The Federal Trade Commission has stated some important requisites and must-haves that the service must include. Hence, make sure that conditions such as appropriate counseling license or debt counseling are fulfilled by the service provider or not.
• It is also advisable to have a debt settlement program in your locality.
• Debt company reviews will also come in handy when you are looking for the right company or services.
• Also check, in what way does the debt repayment program affect credit score, as there are chances it might have a negative effect on the credit ratings and the program might appear in the credit history.
• Lastly, check the commission and fees for the program.

Overall, debt management is bound affect your financial status and debt pile in a positive manner. Hence, choose the best and go in through the fiery forge to shine out at the other end.